Description |
1 online resource (51 pages) : illustrations |
Summary |
"Recent years have seen an increasing use of macroprudential policies (MaPPs) in Europe. Since the global financial crisis, many European countries have implemented macroprudential frameworks and tools, producing an expanding body of empirical research on their effectiveness. In part, the goal of this research is to evaluate the effectiveness of macroprudential policy. This paper discusses how MaPPs have been used in Europe to address risks from the housing market and growing household indebtedness. It also documents developments in riskier mortgages, as well as house prices and credit related to the adoption of MaPPs. Macroprudential policy in Europe aligns with the objective of limiting systemic risk, namely the risk of widespread disruption to the provision of financial services that is caused by an impairment of all or parts of the financial system and that can cause serious negative consequences for the real economy. The paper presents evidence suggesting that MaPP implementation successfully limited systemic risk that could emerge from riskier mortgages and helped to build resilience. That said, many European countries' experiences have not yet spanned a full financial cycle, so any ensuing lessons and empirical evidence remain tentative. Overall, the findings suggest that borrower-based measures, supported by lender-based measures, helped limit the share of riskier mortgages. However, results are more mixed as to the ability of MaPPs to contain house prices and overall credit growth against the backdrop of still-accommodative monetary policy and other factors. This trend supports the notion that macroprudential policies are mainly aimed at strengthening resilience and containing systemic financial risks, rather than steering house prices and overall credit growth. Further, the wide range of institutional arrangements and policies being adopted across countries suggests that there is no one-size-fits all approach. The paper also notes that macroprudential policy effectiveness in influencing house prices through credit should be assessed in the context of other policies affecting house prices. House prices are a function of many drivers, such as supply of land, zoning, tax policy, etc. It should be also noted that to the extent that MaPPs are effective in contributing to reducing housing price growth, the reduction in price will come about via a reduction in demand, as MaPPs make (some) mortgages more expensive. To protect affected households, policymakers can strengthen various policies that promote housing affordability."--Executive Summary |
Notes |
No. 20/03 |
Bibliography |
Includes bibliographical references |
Subject |
Housing -- Prices.
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Housing -- Prices -- Europe
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Housing -- Prices -- Europe, Central
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Housing -- Prices -- Europe, Eastern
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Housing -- Prices.
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Central Europe.
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Eastern Europe.
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Europe.
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Form |
Electronic book
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Author |
Arena, Marco
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Chen, Tingyun
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Choi, Seung Mo
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Geng, Nan
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Gueye, Cheikh Anta
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Lybek, Tonny
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Papageorgiou, Evan
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Zhang, Yuanyan Sophia
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International Monetary Fund. European Department.
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ISBN |
9781513512259 |
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1513512250 |
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